Sierra Club Calls On ERCOT and PUC to Stop Pointing Fingers and

Start Adopting Solutions

(Austin, TX) Sierra Club calls on the Electric Reliability Council of Texas, ERCOT -- Texas’s regional electrical grid operator, and the Public Utility Commission of Texas to focus on adopting solutions that strengthen the state’s commitment to energy efficiency, conservation, and renewable energy such as wind and solar power.

Today, ERCOT issued a short report noting that Texas’s power industry has quickly put compliance plans in place to meet the Environmental Protection Agency’s Cross State Air Pollution Rule (CSAPR) and that ERCOT is now taking steps to mitigate any concerns with reliability.

The report demonstrates that resource owners throughout the state stand ready to comply with CSAPR’s January 1, 2012 deadline, but suggests that compliance with CSAPR could lead to between 1,200 and 6,000 megawatts (MWs) of current generation capacity becoming unavailable.

The Sierra Club applauds ERCOT for noting that resource owners are ready to comply but notes that the report – while highlighting potential shut-downs of older coal plants -- ignores additional resources set to come on-line after the January 2012 compliance date that will further ease any concerns regarding reliability.

“ERCOT and the PUC have multiple tools in their pockets to help meet any reliability concerns,” said Cyrus Reed, with the Sierra Club. “The Club is disappointed that ERCOT’s report did not further address real solutions like encouraging greater participation by large industrial customers to join the “loads acting as resources” (LAARS) program or to take full advantage of the state’s Emergency Interruptible Load Service (EILS) program. But regardless, ERCOT’s report demonstrates that the state can meet EPA’s rules and that industry participants worked quickly to ensure reliability.”

Among the measures Reed said that ERCOT and the PUC must begin implementing are:
1. More robust LAARS and EILS programs that include provisions for participation of smaller entities at more favorable prices to reduce demand in times of increased energy demand
2. Immediate implementation of Senate Bill 1125 signed into law this year, requiring a more robust energy efficiency goal for the state’s nine Transmission and Distribution Utilities, as well as creation of market rules for “demand response” programs so those wishing to lose less energy can bid into the market during all times, and not just when energy is in high demand;
3. Implementation of Senate Bills 943 and 981, which will set more favorable rules for the participation of energy storage and distributed renewable technology like on-site solar in the Texas energy market;
4. Encouraging existing gas plants to invest in new technology like "turbine inlet chilling bulk energy storage" to make their plants more efficient, cleaner and more productive;
5. Implementation of the 500 MW non-wind renewable portfolio standard for solar, geothermal and biomass, proposed in January but never implemented.

Reed noted a number of large-scale renewable projects, including a 400 MW solar plant recently announced by CPS Energy and numerous coastal wind projects are to come on line in 2012, which will help Texas meet its energy needs.

EPA’s CSAPR rule would allow individual industry participants that cannot meet the pollution requirements to buy “allowances” from other industrial participants that pollute less. EPA’s acid rain program marks a highly successful example of this type of pollution reduction system. Large industrial polluters in Texas will reduce emissions in nitrogen oxide (NOx), sulfur dioxide (SOx) and particulate matter (PM). Coal plants are all major polluters in all three of these categories. The Sierra Club has released ozone modeling demonstrating that Texas coal plant emissions are a regional problem and applauded EPA’s inclusion of Texas into all three pollution reduction programs under CSAPR.

"In particular, Luminant’s legacy lignite mine-mouth plants—Big Brown, Monticello, and Martin Lake—account for 25% of all of Texas’s industrial emissions,” said Dr. Neil Carman, chemist and Clean Air Program Director with the Lone Star Chapter of the Sierra Club. "The issue of reliability in the state can be addressed by state agencies and other non-coal generators and energy efficiency companies, but these three coal plants must clean up their act. Luminant’s big three are one of the main reasons Texas is included in this rule and Luminant has known for years that these coal plants were a huge source of pollution for Texas as well as the region.”

Intra-state trading of pollution allowances is unlimited by the rule, thus, allowing industrial polluters who cannot meet the new rule to “pay to play.” A recent Bernstein analysis noted that three entities may need to purchase these pollution credits but that most major industrial players were prepared to meet these rules through pollution controls. The ERCOT report does not address these economic realities in depth and failed to examine the economic incentives for entities to produce power even when complying with new EPA rules and regulations.

“Beyond failing to note that additional resources will come on-line next year, the Club is concerned that ERCOT is already examining what the appropriate value of allowances would be to compensate resource owners,” said Jen Powis with the Sierra Club. “Sierra Club hopes that ERCOT is not planning to bail out Luminant or other industrial players with payments. The Bernstein report demonstrates that the problem in Texas is not compliance, but that Luminant will make less money while complying.”

The Bernstein Report can be found here: http://blogs.edf.org/texascleanairmatters/files/2011/07/CSAPR-Texas.pdf